Real estate is shifting to a more normal market; the days of national home appreciation topping 6% annually seem to be over. As it becomes easier for buyers to obtain mortgages, many are suggesting that this is proof that banks are repeating the same mistakes they made a decade ago. However, it seems we are not heading to another housing “bubble & bust.”
Each month, the Mortgage Bankers’ Association (MBA) releases a measurement which indicates the availability of mortgage credit known as the Mortgage Credit Availability Index (MCAI). According to the MBA:
“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).”
The higher the measurement, the easier it is to get a mortgage. During the buildup to the last housing bubble, the measurement sat at around 400. In 2005 and 2006, the measurement more than doubled to over 800 and was still at almost 600 in 2007. When the market crashed in 2008, the index fell to just over 100.
Over the last decade, as credit began to ease, the index increased to where it is today at 186.7 – still less than half of what it was prior to the buildup of last decade and less than one-quarter of where it was during the bubble.
The graphic below depicts this information (remember, the higher the index, the easier it was to get a mortgage):
Though mortgage standards have loosened somewhat during the last few years, we are nowhere near the standards that helped create the housing crisis ten years ago. Contact Northeast Equitable Mortgage to learn more.